With its recent release of the new Kindle Fire HD tablets, some have argued that Amazon has declared war on Apple and its iPad. But how serious is the threat? Are the two companies even playing the same game? I reached out to analyst Horace Dediu, founder and author of Asymco, to get his take. Dediu will speak on all this and more at TOC Frankfurt on October 9, 2012. Our short interview follows.
How disruptive is the Kindle Fire to the low-end tablet market?
Horace Dediu:The problem I see with the Kindle is that the fuel to make it an increasingly better product that can become a general purpose computer that is hired to do most of what we hire computers to do is not there. I mean, that profitability to invest in new input methods, new ways of interacting and new platforms can’t be obtained from a retailer’s margin.
Also, there is a cycle time problem in that the company does not want to orphan its devices since they should “pay themselves off” as console systems do today. That means the company is not motivated to move its users to newer and “better” solutions that constantly improve. The assumption (implicit) in Kindle is that the product is “good enough” as it is and should be used for many years to come. That’s not a way to ensure improvements necessary to disrupt the computing world.
Lastly, the Amazon brand will have a difficult time reaching six billion consumers. Retail is a notoriously difficult business to expand internationally. Digital retail is not much easier than brick-and-mortar. You can see how slow expansion of different media has been for iTunes.
Is Amazon a threat to Apple?
Horace Dediu: Amazon is asymmetric in many ways to Apple. Asymmetry can always be a threat because the success of one player is not necessarily to the pain of another. Thus, the “threat” is unfelt, and therefore it’s less likely that there is a response in kind. However, it’s important to couple the asymmetry with a trajectory of improvement where the threat goes from unfelt to clear and present. That’s where I’m having a hard time putting Amazon on a path that crosses Apple’s fundamental success. I’d say it’s something to watch carefully but not yet something that requires a change in strategy.
I would add one more footnote: Apple TV is a business that matches Kindle perfectly in strategy. Apple TV is a “cheap” piece of hardware that is designed to encourage content consumption. It is something Apple is doing with very modest success but is not abandoning. Apple is exploring this business model.
What role do you see Apple playing in the future of publishing — and what current trends do you identify as driving factors?
Horace Dediu: I think Apple will put in a greater effort at the K-12 and higher ed levels. I think the education market resonates strongly with them, and they will develop more product strategy there. The main reason is that there are more decision makers and less concentration of channel power.
This interview was lightly edited and condensed.
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